Question

Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the processes. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February:

	Molding	Assembly
Beginning Inventories:
Physical Units	10,000	8,000
Costs:
Transferred in	--	$ 45,200
Direct Materials	$ 22,000	--
Conversion Costs	$ 13,800	$ 16,800
Current Production:
Units Started	25,000	?
Units Transferred Out	30,000	35,000
Costs:
Transferred in	--	?
Direct Materials	$ 56,250	$ 39,550
Conversion Costs	$ 103,500	$ 136,500
Percentage of Completion:
Beginning Inventory	40%	50%
Ending Inventory	80	50

Required:

Using the FIFO method prepare the following for the Molding Department:

a) A physical flow schedule

b) An equivalent units calculation

c) Calculation of unit costs. Round to four decimal places

d) Costs of ending work in process and cost of goods transferred out

e) A cost reconciliation

Answer 1

a) A physical flow schedule

Muskoge Company

Molding Department

A Physical Flow Schedule

	Particulars	Amount	Amount
	Units in the beginning work in process		10,000
Add:	Units started in February		25,000
	Total Units		35,000
	Units Completed and Transferred:
	Beginning Work in Process Units Completed	10,000
Add:	Units started and completed in February*	20,000
Add:	Units in ending work in process**	5,000
	Total Units		35,000

Working

	Particulars	Amount
	Units Transferred Out	30,000
Less:	Beginning inventories	10,000
	*Units started and completed in February	20,000
	Units started in February	25,000
Less:	Units started and completed in February	20,000
	**Units in ending work in process	5,000

b) An equivalent units calculation

	Particulars	Direct materials	Conversion Cost
	Units started and completed in February	20,000	20,000
Add:	Equivalent units in beginning work in process:
	Materials: 10,000*0%	-
	Conversion Cost: 10,000 units x (100% – 40% complete)		6,000
Add:	Equivalent units in ending work in process:
	Materials:	5,000
	Conversion Cost: 5,000 units x 80%		4,000
	Total Equivalent Units	25,000	30,000

c) Calculation of unit costs

	Cost Charged to Department	Direct Materials	Conversion Costs	Total
	Costs in beginning work in process	$22,000	$13,800	$35,800
Add:	Costs added by the department	$56,250	$103,500	$159,750
	Total Cost	$78,250	$117,300	$195,550

Cost per Equivalent Unit = Current Costs added this period / Total Equivalent Units

Unit Cost =  Unit direct materials cost + Unit conversion costs

= $56,250 / 25,000 + $103,500 / 30,000

= $2.25+$3.45

= $5.70

d) Costs of ending work in process and cost of goods transferred out

and

e) cost Recociliation

	Particulars	Amount ($)	Amount ($)
	Costs in ending work in process
	Direct Materials ( 5,000 units * $2.25)		11,250
	Conversion Cost ( 4,000 Units * $3.45)		13,800
	Total Costs in ending work in process[A]		25,050
	Cost of units transferred out
	Cost of units in beginning work in process:
	Prior Period Cost ($22,000+$13,800)	35,800
	Current cost to finish units: [Conversion Cost(6,000 units*3.45)]	+20,700	56,500
Add:	Cost of units started and completed (20,000units* $5.70)		114,000
	Total cost of units transferred out[B]		170,500
	Total costs accounted for [A+B]		195,550

e)

Particulars	Amount($)
Beginning work in process	35,800
Costs incurred	159,750
Total Cost to Account for	195,550